Timothy P. Hubbard

One of the great success stories in economics and game theory during the latter half of the 20th century was the systematic theoretical investigation of incomplete information in different economic environments, including auctions. From an econometrician's perspective, theoretical models of incomplete information are particularly compelling because they provide richer explanations of the observed heterogeneity in data than ones relying on measurement error or productivity shocks.Models of auctions are especially attractive because the rules of an auction govern how the potential buyers must behave during the selling process. Unlike in other economic applications, these rules place incredible structure on the data generating process. In particular, under certain conditions, the twin hypotheses of optimization and equilibrium allow the econometrician to identify the unobserved distribution of valuations from the observed distribution bids.Because the primitives of the economic model are identified, the Lucas critique is circumvented and comparative institutional design, such as comparing outcomes under alternative market institutions not observed in the data, can be undertaken. Structural Econometrics of Auctions summarizes the structural econometric analysis of observational data from auctions. First developing the necessary economic theory, then mapping this to the data-generating processes, and finally investigating the various estimation strategies. Throughout the review, the authors illustrate the methods using a variety of examples, from timber auctions to eBay auctions and auctions of advertising on the Internet.

How auctions work, in theory and practice, with clear explanations and real-world examples that range from government procurement to eBay.Although it is among the oldest of market institutions, the auction is ubiquitous in today's economy, used for everything from government procurement to selling advertising on the Internet to course assignment at MIT's Sloan School. And yet beyond the small number of economists who specialize in the subject, few people understand how auctions really work. This concise, accessible, and engaging book explains both the theory and the practice of auctions. It describes the main auction formats and pricing rules, develops a simple model to explain bidder behavior, and provides a range of real-world examples.The authors explain what constitutes an auction and how auctions can be modeled as games of asymmetric information-that is, games in which some players know something that other players do not. They characterize behavior in these strategic situations and maintain a focus on the real world by illustrating their discussions with examples that include not just auctions held by eBay and Sotheby's, but those used by Google, the U.S. Treasury, TaskRabbit, and charities. Readers will begin to understand how economists model auctions and how the rules of the auction shape bidder incentives. They will appreciate the role auctions play in our modern economy and understand why these selling mechanisms are so resilient.